At which stage of production should a firm shut down? When
AVC=ATC
AVC
AVC>price
AVC=MC
Correct answer is C
A firm will choose to implement a shutdown of production when the revenue received from the sale of the goods or services produced cannot even cover the variable costs of production. In that situation, the firm will experience a higher loss when it produces, compared to not producing at all.
As long as price is above average variable costs, the firm should stay in business to minimize its losses in the short run.
The necessary condition for a firm to be in equilibrium is that marginal revenue is
Greater than marginal
Equal to marginal
Less than average revenue
Equal to average
Correct answer is B
No explanation has been provided for this answer.
An entrepreneur is encouraged to adopt division of labour in production because it
Provide more employment opportunities
Leads to increased output and lower cost of production
Brings about equal cost and employment opportunities
Leads to increased cost of production and lower output
Correct answer is B
Division of labour is immensely important in our economic system because it allows for work to be done much more quickly and efficiently than it would be without the division of labour. Division of labour is when tasks are split up into specialized separate tasks. it brings about increased output and while minimizing cost.
Only the variable factors can be altered
All factors become variable
The firm will cease to exist
Only the fixed factors can be altered
Correct answer is B
The long run is a period of time in which all factors of production and costs are variable. In the long run, firms are able to adjust all costs.
Excess demand
Excess supply
Parallel market
Hoarding of goods
Correct answer is B
A price floor is the lowest legal price a commodity can be sold at. Price floors are used by the government to prevent prices from being too low. When a market reaches a price floor, it results in an excess supply because quantity supplied at the price floor exceeds the quantity demanded.